By Russ Britt

Investors punished Edwards Lifesciences Corp. Wednesday, casting shares down by more than 22% in the early going after the heart-valve maker missed first-quarter earnings and sales estimates and lowered forecasts for the full year.

Bloomberg

Edwards
/quotes/zigman/257334/quotes/nls/ewEW plummeted $18.50 to $64.31 in recent action on the earnings report that was released after the close Tuesday. The fall came despite Edwards’s earnings more than doubling on sales growth of more than 8%.

The Irvine, Calif.-based company said net income for the period ended March 31 was $144.9 million, or $1.24 a share, on sales of $496.7 million. A year ago, Edwards reported earnings of $65.1 million, or 55 cents a share, on sales of $459.2 million. But the jump in earnings was due largely to an $83.6 million patent litigation payment from medical device maker Medtronic Inc.
/quotes/zigman/233680/quotes/nls/mdtMDT

Without the litigation payment, earnings would have been 72 cents a share, four cents short of the 76 cents estimated from analysts polled by FactSet. Sales also fell short, as they had been projected to reach $519 million for the quarter.

In a press statement, Edwards’s Chairman and Chief Executive Michael A. Mussallem said sales were lower than expected across its product lines as the company is ramping up sales on new offerings. Edwards now says it sees adjusted earnings of $3 to $3.10 a share on sales of $2 billion to $2.1 billion. Prior to Wednesday, the FactSet projections called for earnings of $3.27 a share on sales of $2.14 billion.

While some analysts were sympathetic to Edwards’s situation, RBC Capital Markets analyst Glenn Novarro lowered his rating on the stock to “sector perform” from “outperform” and his price target on shares to $72 from $102. Novarro said sales for the company’s new Sapien heart valves were worse than expected.

“Given another Sapien disappointment [for the third straight quarter], we no longer have confidence in management executing on the U.S. launch,” Novarro said in a note to clients.

Spencer Nam at Janney Capital Markets said, however, that heart-valve sales should eventually meet expectations.

“[Edwards's] shares price will likely pull back, but we do not view [first-quarter] results to be signs of broken fundamentals,” Nam said in a note to clients.

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